VeriSign issues disappointing quarterly results

Due to slipping domain name sales and tight corporate IT budgets, VeriSign reported lower-than-expected sales for the first quarter of 2002 and plans to lay off 10 per cent of its workforce.

Indeed, VeriSign changed its outlook for the year in anticipation of continued softness across all of its markets - retail domain name sales, enterprise security services and Internet database lookups - in the next two quarters.

"Our first-quarter results were not up to our expectations as we encountered significant spending delays in our IT and telecom customer bases, particularly in the last few weeks of March, as well as more severe challenges in our mass markets domain name business," VeriSign Chairman and CEO Stratton Sclavos said in a release issued Thursday.

VeriSign lost US$27 million on sales of $328 million in the quarter ended March 31. These figures compare to a loss of $1.3 billion on sales of $213 million in the first quarter of 2001.

VeriSign's losses come after the company acquired a dozen companies including dot-com registry Network Solutions for $21 billion and telephony service provider Illuminet for $1 billion in the past two years. VeriSign employed 3,500 people prior to the layoffs.

VeriSign anticipates charges of between $70 million and $80 million related to the layoffs and restructuring, which will hamper the company's performance in the second and third quarters.

Revenue from the company's retail sales of domain names was down 17 percent from a year ago, dropping to $113 million from $137 million in 2001. During the quarter, VeriSign registered 600,000 new domain names and renewed an additional 1 million names. VeriSign currently manages 12 million names, and 96 percent of those names are in the dot-com, dot-net and dot-org domains.

Company officials expect revenue in this division to keep declining slightly for the next two quarters. That's significant because retail domain name sales represented 34 percent of the company's revenues in the first quarter.

The remaining 66 percent of the company's revenue came from the enterprise and service provider markets, which reported sales of $215 million.

In the enterprise market, VeriSign saw significant delays in corporate spending for its managed PKI and network consulting services. In a conference call on Thursday, Sclavos said he expects slower-than-normal enterprise spending to continue for the next two quarters.

The outlook was strongest for the service provider market, where VeriSign operates the main back-end database for dot-com names as well as telephony databases through Illuminet. VeriSign's registry handled 2.6 million new domain names during the quarter, which was the first increase in new domain name registrations in seven quarters. The registry now handles 27.3 million active domain names and 6.5 billion look-ups per day.

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